A new bill would tax interest, dividends, royalties, rents and capital gains earned abroad by anyone tax-resident in Costa Rica. Economic substance would no longer protect them. Holding, IP and family-wealth structures built on Costa Rica’s territorial system need a fresh look.
On 22 September 2026, Costa Rica’s Executive submitted Bill No. 25.796 to the Legislative Assembly. If enacted as proposed, foreign-source interest, dividends, royalties, rents and capital gains received by Costa Rican tax-resident individuals and entities, including companies and trusts (“fideicomisos”), would generally be taxed at 15%. Economic substance would no longer protect that income from the proposed charge.
Consequently, holding, IP, and family-wealth structures built on Costa Rica’s traditional territorial system need a fresh review.
The End of Territorial Treatment
The proposed change matters because many international structures chose Costa Rica precisely because foreign income fell outside its tax net. Although Bill No. 25.796 (Ley sobre el gravamen de rentas pasivas de fuente extranjera) has not yet been enacted, it has the backing of the governing party’s legislative bloc.
Where Things Stand Today
Costa Rica currently taxes on a territorial basis: income earned abroad is generally outside the Costa Rican tax net. Since Law No. 10.381 (2023), the single main exception has been foreign passive income received by entities that belong to a multinational group and do not meet economic substance requirements.
In practice, individuals, stand-alone companies, and group entities with real substance in Costa Rica currently pay no Costa Rican tax on foreign interest, dividends, or royalties.
What Bill No. 25.796 Would Change
The proposed bill replaces the multinational-group and substance test with a single criterion: Is the recipient tax-resident in Costa Rica?
Current Law vs. Bill No. 25.796
How the proposed regime changes the taxation of foreign-source income
| Feature | Current Law (Today) | Under Bill No. 25.796 |
|---|---|---|
| Who is Taxed | Multinational-group entities without substance | All tax residents: individuals, companies, trusts (fideicomisos), investment funds and entities without legal personality |
| Income Covered | Foreign passive income of those entities | Foreign interest, dividends, royalties, rents and capital gains |
| Role of Substance | Decisive | Irrelevant |
| Rate | Ordinary income tax rules | Flat 15% on gross income; banks, insurers and fund managers supervised by the financial regulators at 30% within ordinary profits |
| Foreign Tax Paid | Largely irrelevant, as most foreign income is untaxed | Deducted from the taxable base, not credited against Costa Rican tax |
| Expenses | Deductible under ordinary rules | No election into the ordinary regime, so related costs cannot be offset |
| Foreign Capital Losses | Largely irrelevant, as most foreign gains are untaxed | Foreign losses not recognised, while foreign gains are taxed |
Active business income would remain territorial. This is a targeted move on passive income, not full worldwide taxation.
The Double Tax Cost: Deduction vs. Credit
The foreign-tax deduction rule is where the bill bites hardest. Consider an example of USD 100,000 in royalties received from abroad subject to a 10% foreign withholding tax:
Deduction vs. Credit: What It Means in Practice
USD 100,000 of royalties from abroad with 10% withholding tax at source
| Tax Calculation Step | Deduction (As Proposed) | Credit (Typical Treaty Approach) |
|---|---|---|
| Costa Rican Taxable Base | USD 90,000 | USD 100,000 |
| Costa Rican Tax at 15% | USD 13,500 | USD 5,00015,000 less 10,000 credit |
| Total Tax, Home & Abroad | USD 23,50023.5% effective rate | USD 15,00015.0% effective rate |
Simplified illustration; it ignores other adjustments, exceptions and treaty relief.
Furthermore, if royalties are passed on under a back-to-back licence, the outbound payment provides no tax relief because the 15% applies to gross income. Where a double tax treaty applies, its relief article should be checked, though Costa Rica’s treaty network remains limited.
Timing
The bill is still before the Legislative Assembly. No date has been set for a vote or for entry into force, and no transitional rules have been published. The final text may differ from the proposal, but with government support behind it, structures should be planned on the basis that some version is likely to pass.
Discuss your structure
Who Should Review Their Structures
- IP & Royalty Companies: Royalties from foreign licensees (especially related parties) would be taxed at 15% gross. Back-to-back licenses and IP cost amortisation lose their tax benefit, and substance no longer provides protection.
- International Holding Companies: Foreign dividends, interest, and disposal gains come into charge, without the ability to offset foreign asset losses. Onward dividends to shareholders may trigger additional taxation unless an exemption or treaty applies.
- Trusts, Funds & Family Vehicles: Costa Rican-resident trusts (fideicomisos), investment funds, and entities without legal personality are explicitly included. Portfolios of foreign securities held through them would be taxed at 15%.
- Internationally Mobile Individuals: Tax residents (typically spending over 183 days in Costa Rica per tax year) would pay 15% on foreign investment and rental income, regardless of nationality or visa status. Retirees, rentistas and others living on foreign portfolio income are directly affected.
Practical Action Plan
- Map the Income: Audit all foreign interest, dividends, royalties, rents, and gains received by Costa Rican entities or residents, identifying foreign tax withheld at source.
- Model the Cost: Recalculate net yields assuming a 15% gross tax with foreign tax deducted rather than credited, with no relief for related costs and no relief for foreign losses.
- Check Onward Flows: Determine the total cumulative tax burden required to distribute profits to ultimate shareholders.
- Pause New Set-ups: Avoid establishing new passive-income holding structures in Costa Rica until the final text is known.
- Evaluate Alternatives: For existing structures where tax efficiency is compromised, assess re-domiciliation or restructuring to alternative jurisdictions before the law takes effect.
BROOKFORT’S VIEW
Costa Rica remains a sound base for active operating businesses. However, for holding, IP, and private wealth vehicles, the choice of jurisdiction deserves a fresh evaluation.
Brookfort Group establishes and administers companies and other legal structures in 23 jurisdictions:
- Americas & Caribbean: Bahamas, Barbados, British Virgin Islands, Canada, Cayman Islands, Curaçao, Nevis, Panama, United States.
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- Middle East, Asia & Pacific: Hong Kong, Marshall Islands, Mauritius, New Zealand, Singapore, United Arab Emirates.
Our services cover incorporation, registered office, directors, governance, accounting, compliance and ongoing administration. We do not provide tax or legal advice; we work alongside your independent legal and tax advisers so that the structure you choose meets your commercial, tax and regulatory objectives.
Reviewing a Costa Rican structure, or planning a new one? Contact Brookfort Group.
This article is provided for informational purposes only and does not constitute legal or tax advice. The content herein should not be relied upon as a substitute for consultation with qualified tax or legal professionals. Readers are strongly encouraged to seek professional guidance tailored to their individual circumstances before making any tax or legal decisions regarding the topics discussed above.